OAKLAND, Calif. — The insurance crisis in California has forced homeowners to turn to the state's FAIR Plan for fire coverage. Now, a new lawsuit alleges the California FAIR Plan illegally has been denying fire damage claims for years.
Many of the nearly 500 homes and structures destroyed in the Park Fire north of Sacramento were insured for fire damage under the California FAIR Plan.
It's expensive insurance of last resort that homeowners are forced into after they get cancelled by mainstream insurance carriers like State Farm.
“The goal of the lawsuit is to obtain the mandatory minimum coverage for all FAIR Plan customers,” said Dylan Schaffer, the Oakland attorney who filed class-action lawsuit. The legal action was filed last week in Alameda County on behalf of an estimated 400,000 homeowners across the state who currently depending on the FAIR Plan.
The lawsuit alleges the FAIR Plan is not covering all fire damage, as required by state law. “Just because it's caused by components of fire that are not heat, doesn't make them not fire damage,” said Schaffer.
Schaffer is referring to smoke and debris damage to nearby homes, which were not destroyed by wildfire. He says the FAIR Plain updated its policies in 2017 to allow the agency to deny some 3,000 claims statewide.
“Let's say you're in a wildfire zone, and three houses around you all burned to the ground. So, what happens to those houses? Well, all that stuff goes up into the atmosphere and it ends up in your house,” said Schaffer.
The FAIR Plan emailed CBS 8 a statement saying it does not comment on pending litigation.
Schaffer said he expects to win the case. He said in about 12 months the FAIR Plan should be forced to cover smoke and debris damage across the state. “They make money by cheating customers, by providing inadequate coverage, and by charging high rates,” Schaffer said.
The attorney said he has filed a separate lawsuit against the FAIR Plan, which is pending in Los Angeles County. That lawsuit could force the FAIR Plan to take another look at the claims it has denied since 2017.
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